E-Commerce Software Sales Will Reach $1.7B This Year

The market for Internet commerce software is likely to explode in 1999, growing 280 percent by the end of the year, according to forecasts from information technology research firm International Data Corp., Framingham, MA.

An IDC study projects that sales of technology designed to let companies do business online will mushroom to $1.7 billion this year, a 280 percent increase over 1998 sales of $444 million. The market grew 154 percent last year, surging along with the number of companies setting up shop on the Web.

"We believe this market is going to change quite a bit in 1999, primarily because of the increase in availability of these products and also because of the urgency on the part of the users out there to implement some of these new e-commerce projects," said Albert Pang, e-commerce software research manager for IDC.

Pang cited pressure to get online and companies' desire to streamline purchases from parts and services suppliers as the factors driving the surge in buying. Retailers, banks and financial services companies are among the biggest buyers of Net commerce applications, while procurement software is the hottest selling type of e-commerce technology.

In the early days of e-commerce, companies depended on their own development teams to make virtual shopping carts, prevent online fraud and carry out all the myriad elements involved in putting together a transaction engine. As firms have introduced software that manages digital commerce, sales of the technology have spiked.

The relatively new industry sector lacks a real dominant player, with leader Netscape Communications Corp. holding less than 10 percent of the market. Netscape was purchased by online service provider America Online Inc., Dulles, VA, in March.

"It's clear that the market is highly fragmented, primarily because of its immaturity. A lot of the vendors did not have products until the second half of 1998, so they were only shipping to a limited number of customers," Pang said.

Netscape, best known for its Net portal, makes software that lets companies automate their procurement process, set up auction sites and carry out other transactions.

IDC splits Net applications into three segments: Internet commerce sales and marketing, commerce procurement and order management, and commerce customer service and support. The firm expects procurement and order management applications -- those used in business-to-business trade -- to account for $8.5 billion of the market's projected total value of $13.1 billion in 2003.

Pang said IDC's findings are based on interviews with roughly 90 e-commerce technology vendors, and follow-up research with application customers, public documents.